The impact of American duties on the economy. Here's what we know now [OPINIA]
What will it be impact? We do not know this, because both further escalation and de -escalation of trade conflicts are possible, or – which may be the most likely – a clear differentiation of customs rates for specific products or their origin countries.
Not knowing the final answer to the questions about the American duties, it is worth remembering that the very uncertainty about the shape of commercial policy (both the US and other large countries) and the scale of limitation of global trading in goods is a factor that significantly weakens the prospect of economic growth in the world.
Difficulties in planning production at the level of individual companies and entire value chains are an important risk for investments, jobs and as a result of consumer expenses.
Lower inflation and interest rates in the world and in Poland
Fears of the pace of economic activity are well illustrated by the behavior of financial markets in April. The raw materials were clearly disgrazing and the expectations of the formation of interest rates in the following months have decreased, and the dollar finally weakened. These factors significantly affect economic perspectives in our country. Cheaper raw materials and strong golden in relation to the dollar result in a clear improvement Terms-of-Trade Polish, which should also reduce import costs and reduce inflation pressure, improving – at least for some time – our commercial balance.
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In such conditions, taking into account probably lower than valued in February or March, interest rates in the main world economies, you can also easily expect fast and significant reduction in interest rates in Poland. In the base scenario, we assume that the Monetary Policy Council will cut feet in May, and by the end of the year the reference rate of the National Bank of Poland will drop to at least 4.50 percent. with 5.75 percent Currently.
Is this enough to prevent the economic situation in our country? The final effect will depend on the scale of American protectionism, but also possible retaliation on the part of the European Union, China and other large economies. While Poland's exports to the USA are equivalent to only about 1.5 percent. GDP, as long as perturbations in global trade can indirectly – through chains of added value in which Polish companies operate – to a much greater impact the economy in our country. Nevertheless, the reduction of inflation and the milder monetary policy will be Ceteris Paribus favorable for the growth of Poland's GDP.
Actions in the EU beneficial for the economic situation in our country
Actions taken by the European Union and its largest economy – Germany should also be favorable for Poland. These activities are less response to American duties, but they refer to the growing doubts about the solidity of the military alliance from the US, and in the case of Germany the need to repair the crumbling public infrastructure.
The EU Rearm Europe program, in addition to the possibility of cheaper financing some of our arms expenses, to some extent soothes EU fiscal rules. This, in turn, can enable Poland – because we spend a lot on defense – slower, and thus much less severe for the economic situation, getting out of the excessive deficit procedure.
On the other hand, the purpose of infrastructure investments planned by the new German government coalition for infrastructure investments 500 billion euros in the next 12 years will directly increase the export and production of building materials produced in Poland and components necessary to implement infrastructure projects.
Author: Michał Dybuła, chief economist of BNP Paribas Bank Polska
